Book Reviews

BOOKS Hayek on Hayek: An Autobiographical Dialogue edited by Stephen Kresge and Leif Wenar The University of Chicago Press. 1994.208 pages. $27.50 Reviewed by Robert Batemarco F .A. Hayek died in 1992 at the age of 92. Most readers of The Freeman know of his writings on business cycles and political phi losophy. But what of Hayek the man? Hayek on Hayek, a supplement to the planned 19 volume Collected Works of F.A. Hayek, gives us insight into the life experiences and turn of mind that shaped one of the premier free-market economists of our time. Prominent among the economic concepts Hayek brought to light was the idea of the market economy as a "spontaneous order." How fitting this was in light of the unfore seeable events which impelled Hayek's ca reer along the circuitous path it traveled. Attracted to economics by his experience in World War I, cured of Fabianism by Ludwig von Mises, drawn to theorizing by his ex posure to Wesley Mitchell's "history with out theory," he ended up forsaking his youthful fascination with biology. His early plan to straddle the academic and govern ment sectors was also derailed by external events-his drawing the attention of Lionel Robbins and being offered a position at the London School of Economics , World War II preventing his return to Austria, and the success of The Road to Serfdom, which at the same time reduced his standing among professional economists and led to a posi tion at the University of Chicago's Commit tee on Social Thought. Hayek's migration from country to country kept him, for the most part, out of the government sector. He was ultimately thankful for this, having theorized "that all economists who serve in government are corrupted as a result .... I 329 owe my own independence [to the fact] that I cleared out of every country as soon as they started using me for governmental service. "

Hayek relates that the most intellectually stimulating period of his life was that part of the 1930she spent at LSE. It was there that his work on the business cycle led him to prominence as the principal critic of John Maynard Keynes. When Hayek stood up to Keynes 'customary attempt to intellectually steamroller younger colleagues, meeting him with serious arguments at every turn, he earned the respect of his nemesis. Despite the close friendship that eventually devel oped between the two men, Keynes' intel lectual evaluation of Hayek was no better than' 'Of course he is crazy, but his ideas are rather interesting." Hayek's view of Keynes was no more flattering. He describes Keynes as devoid of any knowledge of economic history, even of economic theory other than Marshall's, yet supremely confident that he knew more than anyone else. As Hayek put it, "He was so convinced that he was cleverer than all the other people that he thought his instinct told him what ought to be done, and he would invent a theory to convince people to do it."

Not carrying the day over Keynes was not only one of Hayek's biggest personal dis appointments, but also represented a col lapse of effective intellectual opposition to the inflationary policies that have prevailed ever since. Ironically, Hayek believes that the combination of Keynes' sudden death, which accorded him a sort of secular saint hood that placed criticism of his ideas be yond the pale, and his own demonization among academic economists as a result of his Road to Serfdom, finalized Keynes' victory. Nonetheless, Hayek confides that his own belief in the Austrian Business Cycle theory he espoused was strengthened by subsequent events. At this point in his career, Hayek tired of macroeconomics and his professional work turned to methodology and political philos ophy. Conceiving of economics as an em pirical science, he deviated from the prax eological approach pursued by his mentor, 330 THE FREEMAN e MAY 1995 Ludwig von Mises. However, he never accepted the positivism dominant in the economics profession today, which teaches that theories derived from false assumptions are fine as long as they yield accurate predictions. Indeed, his failure to have even attempted to rebut Milton Friedman's Meth odology of Positive Economics, which he deemed "in a way ... quite as dangerous a book," as Keynes' General Theory, was another major source of regret to Hayek.

In some ways, Hayek's method was his downfall. In contrasting the mental apti tudes of Bohm-Bawerk, "the absolute mas ter of his subject," and Wieser, "a slow thoughtful person, to whom nothing was simple, ... who hated discussing anything because he had to give a quick answer," Hayek makes it clear that he himself more resembled Wieser. He adds, "what original ideas I have actually had did not come out of an orderly process of reasoning." In discussing his own adolescent rejection of the Catholic faith into which he was born, Hayek opined that, "if someone really wanted religion, he had better stick to what seemed to me the 'true article,' that is, Roman Catholicism. Protestantism always appeared to me as a step in the process of emancipation from a superstition . . . which, once taken, must lead to complete unbelief. " Surely, both Catholics and Prot estants will take exception to different parts of this claim. I raise it, however, because of a parallel I detect between his rejection of the religious orthodoxy of Catholicism and the Austrian economic orthodoxy of prax eology. While in turning away from the latter, Hayek never approached the total rejection of free-market economics, he did move further in that direction than many people realize. This comes through in the transcript of a 1945 radio discussion of The Road to Serfdom reproduced here. Free market purists will surely cringe at the concessions Hayek makes under the admit ted pounding he takes from the other pan elists, one a socialist, the other aNew Dealer: expressing support for a govern ment-guaranteed minimum income and cen tral banking (' 'that the monetary system must be under central control has never, to my mind, been denied by any sensible person"), for instance.

The narrative is, as one would expect from this type of book, somewhat frag mented and occasionally repetitious. Still, the editors deserve our gratitude for weav ing together as well as they did this melange of scattered autobiographical notes and in terviews into a coherent narrative. Their efforts have accorded us a glimpse into the prolific mind of a man who, whatever his compromises, courageously opposed the in flationary, socialistic, and redistributive spirit of his age. D In addition to editing the book review section of The Freeman, Robert Batemarco is a marketing analyst in New York City and teaches economics at Marymount College in Tarrytown, New York. The New Unionism in the New Society: Public Sector Unions in the Redistributive States by Leo Troy George Mason University Press e 1994 e 228 pagese $42.50 Reviewed by Charles W. Baird L eo Troy, Distinguished Professor of Economics at Rutgers University, has written much about the American union movement-its history, law, economics, and future prospects. The focus of his work has been the changing nature of unionism here and in other advanced industrial coun tries, especially Canada. In New Unionism he has brought together the analyses of several papers he wrote in the 1980sand the early 1990s. This Js an important book, not just for those of us who specialize in union ism, but for all who are concerned about the future course of American society.

Before I get into the substance of the book, with which I enthusiastically agree, I have some minor quibbles. The book con sists of six chapters, a bibliography, three appendices, and three charts. Although the book has a 1994copyright, it is apparent that the six main chapters were written no later than mid-1992.Two appendices are reprints of articles Troy wrote in 1986 and in 1987. The articles are germane to his theme, but it would have been useful to update them. Finally, the entire book suffers from an abundance of typographical errors that should have been picked up when the manu script was in proofs. The impression is that the production of the book, not its writing, was a careless, hurry-up job. Troy's first sentence in Chapter 1 is, "A New Society began to evolve during the past generation and its leading characteristic is the redistributive state." Those words were, to me, reminiscent of the opening sentence of the Communist Manifesto: "A specter is haunting Europe-the specter of Communism. " The association is not as strained as it seems, for Troy's main theme is that government employee unionism (what Troy calls the "New Unionism") is the principal means by which a "New So cialism" has already taken hold, and is spreading, in the United States.

"Old Unionism" (collective bargaining between private sector employers and their employees) has long been waning. It reached its peak market share of 36 percent in 1956. In 1993 the figure was 11.2percent. Conventional labor academics and practi tioners used to think of this as a uniquely American "disease" which they attributed to the resistance of American private sector employers to unionization. As Troy ex plains in the present book, this conventional wisdom was wrong on both counts. The decline of Old Unionism is neither unique to the United States, nor caused by employer resistance to unionism. The decline is hap pening in all advanced industrial countries for two primary reasons. First, there has been a shift from heavily unionized, blue-collar manufacturing em ployment to largely union-free, high-tech manufacturing and service employment. Second, national and international markets are becoming more and more competitive.

According to Troy, these two forces will reduce the market share of Old Unionism to below 7 percent by the year 2000. The old conventional wisdom that private BOOKS 331 sector union decline was a uniquely Amer ican disease was debunked by Troy when, in 1990, he demonstrated that the foreign pri vate sector figures were grossly overstated because they included unions that, in the United States, would be considered public sector institutions. When Troy applied the same definitions of public and private union ism that are used in the United States to foreign unionism, he discovered that private sector unionism has been declining in other advanced industrial countries as much as it has been here. Even pro-union academics now acknowledge that Troy is right on this point. But unionism isn't dead. Government employee unionism, the New Unionism, is not only well established in America (only seven states have failed to pass laws that promote the unionization of state and local employees), it is spreading and becoming more and more menacing to freedom. In 1993, 37.7 percent of all government em ployees were unionized. Troy expects that figure to exceed 40 percent by the tum of the century. New Unionism already domi nates Old Unionism in Canada, Britain, France, and Italy, and Troy expects the same to happen here.

Most observers think of government sec tor unionism as merely an extension of private sector unionism. Troy doesn't agree. He uses the term New Unionism precisely to suggest that government sector unionism is a different, and much more dangerous, breed ofunionism. For example, Old Unionism and socialism were antago nists. Old Unionism wanted to preserve the free enterprise system and redistribute in come from private sector employers to pri vate sector employees. In contrast, the New Unionism promotes what Troy calls the New Socialism, or the redistributive state. The New Socialism recognizes that govern ment ownership of the means of production creates poverty for nearly everyone, so it advocates private ownership of enterprises, but it seeks the socialization of incomes. New Socialism and its chief instrument, New Unionism, seek to transfer income from the private sector to the public sector.

332 THE FREEMAN • MAY 1995 The New Socialism seeks to create as much dependency on government, and as large an army of unionized government employees to carry out government programs and en force government regulations, as possible. All in the name of "fairness." New unionism was virtually nonexistent until President Kennedy signed an execu tive order in 1962 that authorized the for mation of federal employee unions with powers of exclusive representation and mandatory goodfaith bargaining. After that, state after state adopted similar laws, some of which even forced government employ ees to join, or at least pay dues to, govern ment employee unions. After all, unionists argued, a worker is a worker whether he works in the private sector or for govern ment. It is unfair for government workers to be denied the same collective bargaining rights that private sector workers have en joyed since the passage of the National Labor Relations Act (NLRA) in 1935.

Troy convincingly argues that collective bargaining in the government sector is ac tually an attack on the sovereignty delegated to government by the American electorate. When a government is forced to bargain, exclusively, with a private organization on the determination of public policy, that government is no longer sovereign. It no longer has a monopoly on the legal use of force. Government employee unions be come a fourth branch of government whose approval must be obtained before public policy can be fashioned and implemented. With the growth of New Unionism, voters have to share what control over government they have with private organizations called government employee unions. Troy says that a collective bargaining agreement be tween a government employee union and a government employer is like a treaty be tween two sovereign powers. According to Troy the New Unionism doesn't have to worry about eventually losing market share the way the Old Union ism has. Government employment is largely immune to competitive market pressures.

Government monopolizes its activities, and, through regulation, prevents private sector alternatives from developing. Moreover, government employers want the same things that government employee unions want-bigger budgets, more responsibili ties, and more income transferred from the private sector to the public sector. That is why government employers are so much more "cooperative" than private sector employers. It is in their direct self-interest to cave in to union demands. Troy is pessimistic about the future of New Unionism and New Socialism. He considers such innovations as term limits, balanced budget amendments, tax caps, and privatization as possible countervailing forces, but he doesn't seem to have much confidence that such measures will be adopted, or, if adopted, that they will be very effective. The only cause for hope, it seems, is the phenomenon of municipal bankruptcy, such as New York City in the 1970sand again today. Such crises make the perils of New Unionism obvious to anyone who looks.

I am more optimistic than he is. Govern ment failure and voter cynicism are now widespread and growing. The failures of the Old Socialism brought it down, I don't see why the failures of the New Socialism will not, eventually, do the same. In the mean time, books like this one are indispensable in the ongoing battle against socialism in all its forms. D Dr. Baird, a Freeman contributing editor, is a professor of economics at California State Uni versity, Hayward and Director of the Smith Center for Private Enterprise Studies. Race and Culture: A World View by Thomas Sowell New York: Basic Books. 1994. 331 pages. $25.00 Reviewed by John W. Robbins T homas Sowell, a prolific economist and senior fellow at the Hoover Institution in California, has written an important and heretical book on the relationship between race and culture-heretical, that is, as judged by the prevailing dogmas of social science.

Sowell states the obvious, which appar ently is not at all obvious to many social scientists: there are significant differences among cultures; some cultures are in fact superior to other cultures; and they are superior because some values, skills, habits of thought and practice, and ideas are su perior. All these notions, Sowell says, are rejected by the social science establishment: "This book challenges many dogmas of so-called social science, as well as many underlying assumptions about racial issues and cultural differences." Based on extensive travel and research (the hundreds of notes run for 58 pages), Race and Culture is packed with informa tion about races, ethnic groups, migration, conquest, intelligence, slavery, economics, politics, and history. It is indeed a "world view," not in the sense of a Weltan schauung, but in the sense that Sowell has canvassed the world for evidence for his thesis-an international view. He believes that those who are preoccupied with race relations in the United States have failed to study race relations throughout the world and recorded history, and thus entertain warped and distorted views. His book is a badly needed rebuttal to the social science charlatans who infest academia.

In order that he not be misunderstood, Sowell defines his terms immediately in the preface: by "culture" he means "specific skills, general work habits, saving propen sities, and attitudes toward education and entrepreneurship-in short, what econo mists call 'human capitaL'" He warns us that' 'the purpose of this book is not to offer some grand theory explaining cultural dif ferences" -and it does not-but to demon strate the "reality, persistence, and conse quences of cultural differences." "Culture" as Sowell defines it-not genetic superiority or inferiority, nor objective conditions, eco nomic forces, or social structures-is what shapes peoples and history. Sowell uses the word "race" in a colloBOOKS 333 quial sense: "a more scientific definition of race is not attempted." Sowell argues that the preponderance of historical evidence does not support any theory of inherent racial superiority or inferiority, whether the race be Black, Oriental, Semite, or Cauca sian. He cautions the reader against drawing unwarranted conclusions from empirical ev idence, especially statistics: "Vast differ ences between the economic productivity of peoples from different cultures do not imply that these differences are permanent, much less hereditary."

More important than any "objective con ditions" are attitudes: "attitudes toward education, toward business, and toward labor, especially so-called 'menial' labor." A poor attitude toward productive labor has resulted in three-quarters of college graduates in India going to work for the government. Schooling-I do not say edu cation-in many countries has imbued the graduates with what Sowell calls "a pas sionate sense of entitlement." Sowell scorns "self-flattering" ethnic studies, which he finds in many countries, not only in the United States. What requires explanation, Sowell says, is not the disdain for labor one finds in most cultures, includingLatin America (' 'Work is for dogs and Negroes" is a Brazilian say ing),but' 'the extremely highproductivity of a relative handful of northwestern European nations and their overseas off-shoots, such as the United States and Australia." Sowell is at his analytical best in the chapter "Race and Economics," explaining the economics of the nineteenth-century help-wanted ads that read, "No Irish need apply"; why the "vicious cycle of poverty"

is a myth; why nineteenth-century Ameri can workforces were wholly Jewish or wholly Gentile; and much more. Along the way he informs us of innumerable and fascinating details, e.g., Japanese immi grants at the turn of the century were more prevalent in agricultural and domestic labor than blacks. His book is very readable and his style is epigrammatic at times: "The most danger ous kind of ignorance is the·ignorance of the 334 THE FREEMAN • MAY 1995 educated"; "The political mobilization of envy"; "A society can be made ungovern able by the impossibility of satisfying those with a passionate sense of entitlement"; "Being wrong may be a free goOq for intellectuals, judges, or the media, but not for economic transactors competing in the marketplace"; "Respect is earned, not con ferred. It is not a door prize. Equal respect is a contradiction in terms." On slavery Sowell writes: "The biggest story about slavery-how the ancient insti tution, older than either Islam or Christian ity, was wiped out over vast regions of the earth-remains a story seldom told~" Sow ell reports how "the anti-slavery political crusade [that] began among evangelical Christians in eighteenth-century Britain"

was wildly successful, even beyond the dreams of its founders, WilliamWilberforce and Henry Thornton. Sowell's concluding chapter, "Race and History, " is, unfortunately, his weakest. He seems fascinated by the influence of geog raphy on history, although he does not endorse Montesquieu's geographical soft determinism. Despite ending weakly, Race and Culture is first-rate: readable, interest ing, timely, and important. D Dr. Robbins is Director of The Freedom School and Professor ofPolitical Philosophy at College of the Southwest, Hobbs, New Mexico. Education and the State: A Study in Political Economy Third Edition, Revised and Expanded by E. G. West Liberty Fund. 1994. 364 pages. $14.00 cloth; $8.00 paperback Reviewed by Julio H. Cole E.G. West's Education and the State is an important book on an important subject. Liberty Fund has performed a valu able service in sponsoring the expanded third edition of this well known analysis of the economics of state education. Indeed, though West's masterful and no-nonsense study has long been an acknowledged clas sic in its field, it has nonetheless been out of print for quite some time-too long, I should say, given the continuing topicality of its theme.

No one ever seems to be completely satisfied with the quality of education at any given time. Perhaps that is in the nature of things. Too often, however, the tempta tion arises to invoke state intervention in the educational market in order to improve matters, since it is widely assumed that a free market cannot be relied upon to pro duce private educational services of "ac ceptable" quality in socially "optimal" amounts. Thus, the state is called upon to finance schooling (note that, as West points out, there is a difference between "educa tion" and mere "schooling"), usually in the form of state-managed public school sys terns, for a variety of reasons: among other things, public schools are expected to re duce crime, produce good citizens, provide for equal opportunities, and promote eco nomic growth. Quite a tall order! West examines these and other arguments in painstaking detail, subjecting them to penetrating and relentless criticism, and generally concludes that they are either lacking in cogency or based upon faulty interpretations of the evidence. His meth odology is eclectic: rigorous theoretical analyses are complemented with careful historical research and a comprehensive survey of the relevant literature, including an excellent chapter on the opinions of the classical economists, contrasting especially the views of Adam Smith and John Stuart Mill (it is well to recall, in this regard, that West is also a leading Smith scholar, having written the biography Adam Smith-The Man and His Works).

To be sure, most of the historical material is drawn from nineteenth-century British experience (this edition does, however, in clude a new chapter on "The PoliticalEcon omy of American Public School Legisla tion"), although this does not detract from the book's relevance for other times and places. Similar problems are faced by virtually all societies: Should the state educate at all? If so, is a publicly managed school system the best possible solution? Does state education have unwanted and unin tended side effects? In posing these ques tions I have been paraphrasing West. Letme now quote him directly: "Has state educa tion become a 'necessary' institution simply because it is one of those institutions to which we have become accustomed?" Letters to the Editor On Nuclear Power Concerning Rodney Adams' "The First Atomic Age" and "Nuclear Power: Our Best Option" by Mike Oliver and John Hospers (Jan uary 1995): Both articles totally ignored the U.S.

Army Engineer Reactor Group, formed in 1954 and in operation until 1974. This organization built, operated, and maintained small nuclear power plants, both high and low enriched, pres surized-water, all over the world very success fully. They were in existence and operational at the North and South Poles and in Alaska, Wyo ming, Virginia, and the Panama Canal Zone. This elite group of servicemen proved that small nuclear power plants could operate successfully under the most arduous conditions. A good deal of the technology that companies such as GE and Westinghouse gained in nuclear power plants came from that program. The inability of our free enterprise system to develop further, what was already proven, will remain one of the great mysteries of our time. -DAVID E. GONIER (Retired, U.S. Army) Fredericksburg, Virginia RodneyAdams replies: I have a great deal of respect for the technical accomplishments of the Army in their reactor program. Not only did the Army Engineer Re actor Group successfully operate small pressur ized-water reactors in the locations Mr. Gonier mentions, but they also built and operated the first closed-cycle nuclear heated gas turbine.

ML-l, a 300 KW(e) machine designed to be transported to remote communications sites, is a technical ancestor of the machine that Adams Atomic Engines, Inc., is marketing. I must disagree, however, with his final com ment. There is little mystery why the Army's technology was. never commercialized. No one involved with the program, either from the mil itary or from the contractor organizations, ever left their organization with the fireto develop new BOOKS 335 Serious thinking on educational policy reform cannot really begin until these ques tions are addressed openly and honestly. Education and the State is a bold attempt to face these issues. This handsome new edi tion will help to provide the wide readership it deserves. D Professor Cole teaches economics at Univer sidad Francisco Marroquin in Guatemala. markets for the exciting technology they had learned. Even in the nuclear industry, few people have heard much about the Army's program or its accomplishments.

The main point in my article is that technical revolutions are led by promoters as much as they are by inventors, engineers, and technicians. The success of a market economy depends on people who are free to be rewarded for the risks of challenging the status quo. Market success also depends on those people being allowed to fail. Bureaucratic organizations rarely provide the freedom necessary for true innovation. Assent on Tacit Consent I was pleased to see the work of a fellow Montanan in your January 1995 issue. Bowen Greenwood's "Tacit Consent: A Quiet Tyran ny" was very well reasoned and presented. The idea of tacit consent is, of course, detri mental to a free government. For years the Left has been telling us, "If you live here, and enjoy the benefits of the state, then you agree to pay the taxes we levy to maintain that state." They've used the idea of tacit consent to justify taxes to which we would never actually consent.

My congratulations to The Freeman for your continuing good work, and your success at find ing insightful new writers, especially local ones! -SENATOR SHARON ESTRADA Montana State Senate We will print the most interesting and provocative letters we receive regarding Freeman articles and the issues they raise. Brevity is encouraged; longer letters may be edited because of space limitations. Send your letters to: The Freeman, FEE, 30 S. Broadway, Irvington-on-Hudson, New York 10533; fax (914) 591-8910.

Former Congressman Ron Paul The situation is alarming, but there is some good news about higher education in America. One college-The CSW Freedom Schoolis swimming strongly against the academic tide toward socialism. The press is filled with horror stories about higher education in America: college teachers and textbooks that attack Western civilization, administrators who enforce "politically correct" views, and college courses that have no intellectual or spiritual value. ~~~0°1961.° The CSW Freedom School College of the Southwest 6610 Lovington Highway Hobbs, New Mexico 88240 (800) 530-4400 Dr. Clarence Carson Bestselling author and educator "To study the laws in nature and revelation, and to induce young minds to abide by these laws-that is the primary task of education. It is the great mission of The CSW Freedom School." "The Freedom School is based upon an idea whose time has surely come. If men are to be free in any society and under any government, that freedom must be solidly based on enduring foundations. In identifying and setting forth these foundations, as well as teaching them to those willing to learn, The Freedom School is set on the right course."

Dr. Hans F. Sennholz President, FEE "The CSW Freedom School is unique in its effort to rethink higher education and offers a new generation of Americans the intellectual tools needed to restore American greatness." If you are an adult concerned about the future of higher education in America, or if you are a student looking for a solid education, you will want to participate in building The CSW Freedom School. Please call or write us today for more information. Founded in 1962, College of the Southwest is a private, independent four-year liberal arts college based on Christian ideas and principles. College of the Southwest neither seeks nor accepts state or federal financing. It relies entirely on fees paid by students and gifts from those who understand and agree with its philosophy of education. The CSW Freedom School is a new and innovative program of classroom instruction, reading, lectures, conferences, and publications designed to produce free, humane, and civilized individuals.

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